| As of December 1, 2008, the Financial Industry | | | | prepared to provide backup documents to evidence |
| Regulation Authority (FINRA) began a new policy for | | | | that historical changes (such as board and shareholder |
| effectuating corporate actions for OTCBB quoted and | | | | consents and meeting minutes) were executed |
| traded securities (securities quoted and traded on the | | | | properly. |
| Over the Counter Bulletin Board and the PinkSheets). | | | | Reverse Mergers and Required Documentation |
| Corporate actions include anything that would require | | | | In a transaction involving two entities such as a |
| notification to FINRA and the issuance of a new | | | | reverse merger or acquisition, Issuers must provide |
| trading symbol, such as a name change, reverse or | | | | relevant documentation regarding the proposed |
| forward stock split. | | | | change, including board and shareholder consents and |
| Prior to the initiation of the new procedures, Issuers | | | | amendments filed with the state. Issuers must also |
| making corporate changes were only required to | | | | provide an opinion letter from an attorney licensed in |
| submit a short cover letter explaining the action and | | | | the relevant state opining that the entity in question is |
| providing the new CUSIP number. In addition, they were | | | | the same corporate entity as the public entity and that |
| required to submit a copy of the documents | | | | the transaction is otherwise legal. |
| evidencing the corporate action, including board and | | | | Simply stated, following a merger or change of |
| shareholder consents and amended articles of | | | | domicile from Florida to Delaware, an issuer would be |
| incorporation. In addition, transfer agents were and are | | | | required to provide opinions from attorneys licensed in |
| still required to submit transfer agent verification forms | | | | both Florida and Delaware opining that the merged |
| at least ten days prior to the effective date of the | | | | entity is the same public company and that the |
| corporate action. | | | | transaction was legal in both states. |
| New Procedure and Exhibits | | | | In many cases the documents provided by the Issuer |
| The new procedures require Issuers to submit detailed | | | | must be executed and notarized. |
| cover letters, numerous corporate records and | | | | Another common request is for a letter from the |
| completed standardized forms. In addition, Issuers must | | | | transfer agent confirming that they have had sole and |
| now document and evidence proper corporate | | | | continuous custody and control over the company's |
| procedures and maintain historical books and records | | | | shareholder records. |
| in their entirety. Although FINRA is still refining its own | | | | FINRA Notifications |
| internal review process, which will help expedite | | | | All of the above documents and information must be |
| properly submitted documentation, the new procedures | | | | provided by each and every issuer engaging in |
| will ultimately benefit legitimate corporate management | | | | corporate action which requires FINRA notification. In |
| and deter those who attempt to take action without | | | | addition, upon review, and at the option of FINRA, |
| proper authority. | | | | additional information may be requested. A common |
| The new OTC Equity Issuer Notification Form requires | | | | additional request is for the issuer to provide copies of |
| detailed information regarding the Company, | | | | all resignations from prior board members. |
| specifically, its name and address, all contact | | | | Lastly, if there has been a change of transfer agent, |
| information, details regarding its securities as well as | | | | transfer agent notifications must be provided by both |
| complete transfer agent information. In addition, all | | | | the current and former transfer agent in order to once |
| officers must be listed and copies of properly | | | | again establish an uninterrupted chain of control over |
| executed board resolutions and meeting minutes | | | | the Company's shareholder records. This requirement |
| appointing each officer must be provided. | | | | also ensures that the Company shareholder records |
| Name Changes and Stock Splits | | | | have not been altered in any way. |
| The new OTC Equity Name Change/Stock Split | | | | The Need for Corporate Counsel |
| Request Form requires detailed information regarding | | | | Some Issuers perceive the new FINRA requirements |
| the proposed corporate action and sets forth the | | | | to be cumbersome and needlessly expensive to |
| supporting documentation which must be provided. In | | | | comply with. These same Issuers are also dismayed |
| particular, an Issuer must provide a cover letter that | | | | by the additional time it now takes to have a submittal |
| provides a complete and detailed corporate history of | | | | reviewed by FINRA. However, as a whole, these new |
| the company including an explanation for every | | | | rules are appropriate and necessary. They merely |
| corporate change that ever occurred. These | | | | require public entities to maintain proper and complete |
| corporate changes include, but are not limited to; every | | | | books and records and to follow state corporate law |
| amendment filed with the state of incorporation, | | | | regarding board and shareholder changes and |
| changes in control, and name changes and stock splits, | | | | consents; practices the Issuer should be adhering to |
| from its date of inception to the present date. | | | | already. |
| In order to fulfill this requirement, Issuer's must possess | | | | Obviously, the aforementioned FINRA requirements |
| all documents that have been filed with its state of | | | | make the ongoing involvement and advice of securities |
| incorporation and any successor states if there has | | | | legal counsel all the more necessary. |
| been a change in domicile. Moreover, an Issuer mustbe | | | | |